It is up to the voters to decide which Presidential candidate has a better plan to go over Wall Street execs and end the commercial banks from engaging in the investment business and not simply have the same repeated bank offenders to continue to pay a fine and sign a non-prosecution agreement in order to avoid jail time.
According to Hillary Clinton, if you were a victim of the foreclosure crisis, it was probably your fault.
The only problem with that argument is that it’s not even close to factually correct.
Clinton in 2007: Homeowners “should have known they were getting in over their heads”
When Clinton ran for president during her second term as New York’s U.S. Senator, she gave a tepid speech at the NASDAQ headquarters on December 5, 2007 — before the financial crisis reached a boiling point — about reforming Wall Street’s housing loan practices, largely excusing financial criminals for their behavior.
“Now these economic problems are certainly not all Wall Street’s fault – not by a long shot,” Clinton said early in the speech.
Clinton’s NASDAQ address amounted to essentially asking the financiers assembled to take voluntary action or else she would “consider legislation” to stop banks from kicking families out of their homes. But early on in the speech, Clinton placed equal blame for the subprime mortgage crisis on low-income homeowners alongside Wall Street.
“Homebuyers who paid extra fees to avoid documenting their income should have known they were getting in over their heads,” Clinton said.
One YouTube user found video of the statement and put it side-by-side with her claim at the first Democratic debate in which she said she went to Wall Street before the crisis and told them to “cut it out.”
I read a financial book a couple of years ago that discuss the 10 causes of the financial crisis. I posted some of the highlights on my Justice League blog in 2012:
I mentioned Credit Default Swaps are one of the causes of the financial crisis. Of course there are others. First, let’s talk about Securitization.
Securitization sounds like a great deal for anyone such as the banks, investors, and so on. But, the securitization of pools of mortgages into mortgage-backed securities (MBS) allowed banks to transfer risk to investors because banks no longer obliged to hold mortgages. This allowed banks and mortgage companies to originate more loans and make more money. The more money, the more profits for the banks. And securitization started to apply to other products such as car loans, student loans, credit card debt, and so on.
Second, subprime loans or liar loans.
Once securitization came to play, banks came up with other method of increasing their profits: Originate loans quickly and sell them off to the government, Fannie Mae and Freddie Mac, or to giant mortgage companies such as Countrywide, Option One, Washington Mutual, etc. and change the lending standards such as 0% down, no documentation of income or payment histories, etc.
Third, financial institutions that are deemed “Too Big To Fail.”
We now know which banks own the majority of the US economy: Bank of America, JP Morgan Chase, Wells Fargo, Citigroup, and Goldman Sachs. I called them the “Five Families.” These five families according to Dallas Federal Reserve head own 56% of the US economy. Notice that Goldman Sachs was named with the rest of the four banks. Keep in mind that Goldman Sachs is an investment firm. And in 2008, Goldman Sachs as well as Morgan Stanley became a bank holding company. And of course, Litton Loans, a mortgage servicing company, was owned by Goldman Sachs before Goldman sold Litton Loan to Ocwen.
In December 2000, thanks to the banking lobbyists’ pressure, Senate passed Commodity Futures Modernization Act which allowed the banks and brokerages to create insurance-type products. Yes, we were introduced to insurance-like products called “Credit Default Swaps.” This product, because it was unregulated, allowed traders that worked for banks and insurance companies to place bets on everything including mortgages and even on products that didn’t own. The risker the bet, the higher the return. And thanks to the introduction of subprime loans, subprime loans were the riskiest. this is what led to demise of Bear Stearns, Lehman Brothers, and AIG.
Fifth, Residential and Commerical housing bubble
Certainly much of the blame of the residential and commerical housing bubble is Congress that resisted in reforming Freddie and Fannie rather allowing Freddie and Fannie to buy mortgages from lenders, securitized the loans into bonds, and selling those bonds to investors. As far as commerical mortgages, they were sliced up, securitized, and sold to investors (i.e. state and municipal pension funds, non-profit foundations, etc.)
Sixth, Politicians wanting to stay in office and benefits from the financial crisis
It has been well known of the many ex- lawmakers and who have personal relationships with our current elected officials have fled to the career as a lobbyist. People who check their own former elected officials to see who is now a registered lobbyist as well as their current elected officials to see if he or she has any lobbyist that works in his or her office or writing his or her bills.
After the Glass-Steagall Act, which was a bill in the Great Depression that prohibited commerical banks and investment banks merger, which officially ended regulation for the banks, this is why we had products such as “Credit Default Swaps’ to be unregulated and allow banks to hide liabilities and participate in high risk investments.
When each nation has its own set of rules for regulating and financial transactions of a company and that international company declares bankruptcy, it affects other companies globally and becomes a financial nightmare. Lehman Brothers’ bankruptcy is an example as many banks and investment firms globally sued to get back the billions that was invested in Lehman bonds and derivatives.
Nine, Credit Rating Agencies
The three major financial rating agencies—Moody’s, Standard & Poors, and Fitch are supposed to office non-biased rating on stocks and bonds. Right? Wrong. All three credit rating agencies gave Lehman Brothers bonds an “A” ratings right up to the day Lehman Brothers filed bankruptcy.
Ten, Federal Reserve Chairman Alan Greenspan
Remember Greenspan, the “godfather of the economy” or the man kept interest rates too low for too long that encouraged buyers to purchase homes in a bid-up market and the height of the housing bubble? This is the same Greenspan who opposed tighter regulation on derivatives and subprime mortgages, had faith in free markets to regulate themselves, and endorsed adjustable rate mortgages (ARM) that ending up being bad advice which left homeowners’ mortgages upside down and left holding the bag.
Yes, there are other individuals and entities to blame such as the Securities Exchange Commission, federal regulators, FDIC, Office of Thrift Supervision (OTS), Justice Department, Office of Comptroller of Currency, homeowners who took out those liar loans and knew that they couldn’t afford them, current Federal Reserve Chairman Ben Bernanke (when he took over Greenspan’s job) who never disclosed to the public the discount window loans given to the banks besides the $700 billion dollar taxpayer money to bail them out, Clinton Administration for allowing the deregulation, Bush Administration for escalating the deregulation which eventually crashed the economy, and so on. We can continue to discuss the causes of the global financial crisis. The real question is will we learn from this and will this be repeated again?